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| Quantum Corporation Reports Fiscal Third Quarter Results |
SAN JOSE, CA, Jan 25, 2012 (MARKETWIRE via COMTEX) --Quantum Corp. (NYSE: QTM) Highlights:
Quantum Corp. (NYSE: QTM), a proven global expert in data protection and big data management, today reported results for the third quarter of fiscal 2012 (FQ3'12), ended Dec. 31, 2011. Revenue for the quarter totaled $173 million, down 2 percent from the third quarter of fiscal 2011 (FQ3'11) primarily due to expected reductions in OEM and royalty revenue. On a sequential basis, third quarter revenue was up $8 million. In addition, FQ3'12 was the ninth consecutive quarter of year-over-year growth in branded revenue, which increased 3 percent and represented 81 percent of total non-royalty revenue. Quantum also generated record revenue of $36 million from disk system and software sales (including related maintenance), which increased 18 percent from the same quarter last year. GAAP net income for FQ3'12 was $4 million, or 2 cents per diluted share, compared to GAAP net income of $6 million, or 3 cents per diluted share, in FQ3'11. Non-GAAP net income for the quarter was $12 million, or 5 cents per diluted share, down from $16 million, or 7 cents per diluted share, in the comparable quarter last year. The year-over-year decline in GAAP and non-GAAP net income was primarily due to lower tape-related service and media royalty revenue. "We are pleased with the continued momentum we saw across key areas in the December quarter," said Jon Gacek, president and CEO of Quantum. "Quantum branded revenue, which now makes up more than 80 percent of total product and service revenue, grew year-over-year for the ninth consecutive quarter. We also achieved a new high for disk and software revenue, with a strong contribution from new product sales, and generated our highest level of branded tape automation revenue in eight quarters. "Sales of our DXi6701/02 and DXi4601 disk backup and deduplication products were particularly strong, and customers also responded very positively to our new vmPRO(TM) virtual data protection solutions, all of which speaks to the unique value we offer customers in protecting both physical and virtual machine data. We also saw significant traction with our new StorNext(R) appliances, as more customers are turning to Quantum for big data management solutions that enable them to maximize revenue and accelerate time-to-market by fully leveraging their digital assets." The company generated $16 million in cash from operating activities and ended the quarter with $69 million of senior debt, $135 million of convertible debt and $63 million in cash and cash equivalents. Outlook For the fourth quarter of fiscal 2012, Quantum expects:
Business Highlights Key business highlights for the December quarter include the following:
Conference Call and Audio Webcast Notification Quantum will hold a conference call today, Jan. 25, 2012, at 2:00 p.m. PST, to discuss its fiscal third quarter results. Press and industry analysts are invited to attend in listen-only mode. Dial-in number: (480) 629-9645 (U.S. & International). Quantum will provide a live audio webcast of the conference call beginning today, Jan. 25, 2012, at 2:00 p.m. PST. Site for the webcast and related information: http://www.quantum.com/investors. About Quantum Quantum Corp. (NYSE: QTM) is a proven global expert in data protection and big data management that provides a unique combination of intelligent storage solutions and unmatched value for traditional, virtual and cloud environments. From small businesses to multinational enterprises, more than 50,000 customers trust Quantum to help cost effectively manage data growth and extract the full value from their digital assets. Quantum's offerings include: DXi(R)-Series disk-based deduplication and replication systems for fast backup and restore, vmPRO(TM) solutions for protecting virtual machine data, Scalar(R) tape automation products for disaster recovery and long-term data retention, and StorNext(R) big data management software and appliances for high-performance file sharing and archiving. Quantum Corp., 1650 Technology Drive, Suite 800, San Jose, CA 95110, (408) 944-4000, www.quantum.com. Quantum, the Quantum logo, DXi, Scalar, StorNext and vmPRO are either registered trademarks or trademarks of Quantum Corporation and its affiliates in the United States and/or other countries. All other trademarks are the property of their respective owners. "Safe Harbor" Statement under the U.S. Private Securities Litigation Reform Act of 1995: This press release contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Specifically, without limitation, all of our statements under the "Outlook" section are forward-looking statements within the meaning of the Safe Harbor. All forward-looking statements in this press release are based on information available to Quantum on the date hereof. These statements involve known and unknown risks, uncertainties and other factors that may cause Quantum's actual results to differ materially from those implied by the forward-looking statement. More detailed information about these risk factors, and additional risk factors, are set forth in Quantum's periodic filings with the Securities and Exchange Commission, including, but not limited to, those risks and uncertainties listed in the section entitled "Item 1A. Risk Factors," in Quantum's Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 14, 2011 and Quantum's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 9, 2011. Quantum expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. Use of Non-GAAP Financial Measures Quantum believes that the non-GAAP financial measures disclosed above provide useful and supplemental information to investors regarding its quarterly financial performance. Quantum management uses these non-GAAP financial measures internally to understand, manage, and evaluate the company's business results and make operating decisions. For instance, Quantum management often makes decisions regarding staffing, future management priorities and how the company will direct future operating expenses on the basis of non-GAAP financial measures. In addition, compensation of our employees is based in part on the performance of our business based on non-GAAP operating income. The non-GAAP financial measures used in this press release exclude the impact of amortization of intangibles, share-based compensation expense, senior debt amendment fees and loss on debt extinguishment for the following reasons: Amortization of Intangible Assets This includes acquired intangibles such as purchased technology and customer relationships in connection with prior acquisitions. These expenses are not factored into management's evaluation of potential acquisitions or Quantum's performance after completion of the acquisitions because they are not related to Quantum's core operating performance. In addition, the frequency and amount of such charges can vary significantly based on the size and timing of acquisitions and the maturities of the businesses being acquired. Excluding acquisition-related charges from non-GAAP measures provides investors with a basis to compare Quantum against the performance of other companies without the variability caused by purchase accounting. Share-Based Compensation Expense Share-based compensation expense relates primarily to equity awards such as stock options and restricted stock units. Share-based compensation is a non-cash expense that varies in amount from period to period and is dependent on market forces that are often beyond Quantum's control. As a result, management excludes this item from Quantum's internal operating forecasts and models. Management believes that non-GAAP measures adjusted for share-based compensation provide investors with a basis to measure Quantum's core performance against the performance of other companies without the variability created by share-based compensation as a result of the variety of equity awards used by other companies and the varying methodologies and assumptions used. Senior Debt Amendment Fees The senior debt amendment fees relate to a specific amendment fee and are not part of Quantum's future core operations. Loss on Debt Extinguishment The loss on extinguishment of debt relates to a specific debt refinancing action and is not part of Quantum's future core operations. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude charges that have a material impact on the company's reported financial results and, therefore, should not be relied upon as the sole financial measures to evaluate the company. The non-GAAP financial measures are meant to supplement, and be viewed in conjunction with, GAAP financial measures. Investors are encouraged to review the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the tables accompanying this press release. QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
---------------------- ----------------------
December December December December
31, 2011 31, 2010 31, 2011 31, 2010
---------- ---------- ---------- ----------
Revenue:
Product $ 124,081 $ 123,218 $ 341,475 $ 344,001
Service 35,362 37,365 107,956 113,730
Royalty 14,049 15,643 42,635 49,442
---------- ---------- ---------- ----------
Total revenue 173,492 176,226 492,066 507,173
Cost of revenue:
Product 77,238 77,456 218,044 221,158
Service 22,537 23,200 65,732 71,595
Restructuring benefit
related to cost of
revenue -- -- (300) --
---------- ---------- ---------- ----------
Total cost of revenue 99,775 100,656 283,476 292,753
---------- ---------- ---------- ----------
Gross margin 73,717 75,570 208,590 214,420
Operating expenses:
Research and
development 17,629 18,240 55,212 54,490
Sales and marketing 33,350 31,776 94,990 90,973
General and
administrative 15,759 14,176 46,991 44,600
Restructuring charges -- -- 699 11
---------- ---------- ---------- ----------
Total operating
expenses 66,738 64,192 197,892 190,074
Gain on sale of patents -- -- 1,500 --
---------- ---------- ---------- ----------
Income from
operations 6,979 11,378 12,198 24,346
Interest income and
other, net (142) (250) (422) 24
Interest expense (2,450) (4,761) (8,111) (16,877)
Loss on debt
extinguishment -- (1,186) -- (1,186)
---------- ---------- ---------- ----------
Income before
income taxes 4,387 5,181 3,665 6,307
Income tax provision
(benefit) 473 (683) 1,416 114
---------- ---------- ---------- ----------
Net income $ 3,914 $ 5,864 $ 2,249 $ 6,193
========== ========== ========== ==========
Basic and diluted net
income per share: $ 0.02 $ 0.03 $ 0.01 $ 0.03
Weighted average common and
common equivalent shares:
Basic 233,812 222,801 231,661 219,052
Diluted 239,912 235,099 239,261 228,154
----------------------------------------------------------------------------
Included in the above
Statements of
Operations:
Amortization of
intangibles:
Cost of revenue $ 1,472 $ 2,574 $ 6,148 $ 12,087
Research and
development -- -- -- 200
Sales and marketing 3,256 3,332 9,872 10,088
General and
administrative -- 25 32 75
---------- ---------- ---------- ----------
4,728 5,931 16,052 22,450
Share-based compensation:
Cost of revenue 495 459 1,518 1,363
Research and
development 795 603 2,466 1,933
Sales and marketing 1,127 786 3,059 2,391
General and
administrative 1,007 686 3,203 2,363
---------- ---------- ---------- ----------
3,424 2,534 10,246 8,050
Acquisition expenses -- -- 325 --
----------------------------------------------------------------------------
QUANTUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, March 31,
2011 2011*
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 59,250 $ 76,010
Restricted cash 3,987 1,863
Accounts receivable, net 115,106 114,969
Manufacturing inventories 58,879 48,131
Service parts inventories 41,036 45,036
Deferred income taxes 6,384 6,271
Other current assets 10,358 11,274
------------ ------------
Total current assets 295,000 303,554
Long-term assets:
Property and equipment, net 24,818 24,980
Intangible assets and goodwill 86,416 91,481
Other long-term assets 8,962 10,950
------------ ------------
Total long-term assets 120,196 127,411
------------ ------------
$ 415,196 $ 430,965
============ ============
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 59,238 $ 52,203
Accrued warranty 7,080 7,034
Deferred revenue, current 84,537 87,488
Current portion of long-term debt 708 1,067
Accrued restructuring charges 689 4,028
Accrued compensation 33,072 31,249
Income taxes payable 1,542 1,172
Other accrued liabilities 19,277 21,418
------------ ------------
Total current liabilities 206,143 205,659
Long-term liabilities:
Deferred revenue, long-term 34,533 34,281
Deferred income taxes 6,129 6,820
Long-term debt 67,929 103,267
Convertible subordinated debt 135,000 135,000
Other long-term liabilities 7,199 7,049
------------ ------------
Total long-term liabilities 250,790 286,417
Stockholders' deficit (41,737) (61,111)
------------ ------------
$ 415,196 $ 430,965
============ ============
* Derived from the March 31, 2011 audited Consolidated Financial Statements.
QUANTUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
--------------------------
December 31, December 31,
2011 2010
------------ ------------
Cash flows from operating activities:
Net income $ 2,249 $ 6,193
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 8,776 8,780
Amortization 17,785 23,728
Service parts lower of cost or market
adjustment 7,564 10,957
Loss on debt extinguishment -- 1,186
Deferred income taxes (785) (417)
Share-based compensation 10,246 8,050
Changes in assets and liabilities, net of
effect of acquisition:
Accounts receivable (131) (15,350)
Manufacturing inventories (17,463) (5,861)
Service parts inventories 3,150 1,524
Accounts payable 7,052 2,000
Accrued warranty 46 626
Deferred revenue (2,727) (9,312)
Accrued restructuring charges (3,347) (2,856)
Accrued compensation 1,975 (1,068)
Income taxes payable 438 (1,159)
Other assets and liabilities (1,735) 1,900
------------ ------------
Net cash provided by operating activities 33,093 28,921
Cash flows from investing activities:
Purchases of property and equipment (8,538) (9,348)
(Increase) decrease in restricted cash (2,317) 222
Return of principal from other investments 97 95
Payment for business acquisition, net of cash
acquired (8,152) --
------------ ------------
Net cash used in investing activities (18,910) (9,031)
Cash flows from financing activities:
Repayments of long-term debt (35,698) (163,079)
Borrowings of convertible subordinated debt,
net -- 130,022
Repayments of convertible subordinated debt -- (22,099)
Payment of taxes due upon vesting of
restricted stock (2,638) (2,165)
Proceeds from issuance of common stock 7,506 13,635
------------ ------------
Net cash used in financing activities (30,830) (43,686)
Effect of exchange rate changes on cash and cash
equivalents (113) 47
Net decrease in cash and cash equivalents (16,760) (23,749)
Cash and cash equivalents at beginning of period 76,010 114,947
------------ ------------
Cash and cash equivalents at end of period $ 59,250 $ 91,198
============ ============
QUANTUM CORPORATION
GAAP TO NON-GAAP RECONCILIATION
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended December 31, 2011
---------------------------------------------
Per Per
Share Share
Gross Net Net
Gross Margin Net Income, Income,
Margin Rate Income Basic Diluted
-------- ------ ------- -------- --------
GAAP $ 73,717 42.5% $ 3,914 $ 0.02 $ 0.02
Non-GAAP Reconciling Items:
Amortization of intangibles 1,472 4,728
Share-based compensation 495 3,424
-------- -------
Non-GAAP $ 75,684 43.6% $12,066 $ 0.05 $ 0.05
Computation of basic and diluted net
income per share: GAAP Non-GAAP
-------- --------
Net income $ 3,914 $ 12,066
Interest on dilutive convertible
notes -- 1,191
-------- --------
Income for purposes of computing income
per diluted share $ 3,914 $ 13,257
======== ========
Weighted average shares:
Basic 233,812 233,812
Dilutive shares from stock plans 6,100 6,100
Dilutive shares from convertible
notes -- 31,158
-------- --------
Diluted 239,912 271,070
======== ========
Three Months Ended December 31, 2010
---------------------------------------------
Per Per
Share Share
Gross Net Net
Gross Margin Net Income, Income,
Margin Rate Income Basic Diluted
-------- ------ ------- -------- --------
GAAP $ 75,570 42.9% $ 5,864 $ 0.03 $ 0.03
Non-GAAP Reconciling Items:
Amortization of intangibles 2,574 5,931
Share-based compensation 459 2,534
Loss on debt extinguishment 1,186
Senior debt amendment fees 861
-------- -------
Non-GAAP $ 78,603 44.6% $16,376 $ 0.08 $ 0.07
Computation of basic and diluted net
income per share: GAAP Non-GAAP
-------- --------
Net income $ 5,864 $ 16,376
Interest on dilutive convertible
notes -- 595
-------- --------
Income for purposes of computing income
per diluted share $ 5,864 $ 16,971
======== ========
Weighted average shares:
Basic 222,801 222,801
Dilutive shares from stock plans 12,298 12,298
Dilutive shares from convertible
notes -- 15,579
-------- --------
Diluted 235,099 250,678
======== ========
The non-GAAP financial information set forth in this table is not prepared
in accordance with generally accepted accounting principles and may be
different from non-GAAP financial information used by other companies.
QUANTUM CORPORATION
FORECAST FOURTH QUARTER FISCAL 2012
GAAP TO NON-GAAP RECONCILIATION
(Dollars in millions)
-------------
Dollars
-------------
Forecast operating expense on a GAAP basis $68.4 - $70.4
Forecast amortization of intangibles 3.3
Forecast share-based compensation 3.1
-------------
Forecast operating expense on a non-GAAP basis $62.0 - $64.0
=============
Estimates based on current (January 25, 2012) projections.
The projected GAAP and non-GAAP financial information set forth in
this table represent forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. For risk
factors that could impact these projections, see our Annual Report
on Form 10-K as filed with the SEC on June 14, 2011. We disclaim
any obligation to update information in any forward-looking
statement.
The non-GAAP financial information set forth in this table is not
prepared in accordance with generally accepted accounting
principles and may be different from non-GAAP financial information
used by other companies.
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INTRODUCTION TO QUANTUM
Quantum CEO and President, Jon Gacek, discusses Quantum Certainty in a changing environment.
Watch the video